Devilish Details

Saturday, April 3, 2010

In 1998, the Wall Street Journal published an op-ed of mine on the need to reform medical insurance/care and how to do it without resorting to coercion; that is, without federal law forcing citizens to do something against their will.

Of course, all laws are ultimately backed up by agents with guns. If that weren’t the case, people would ignore the laws.

The op-ed was part of a decade-long crusade of mine to not only reform medical insurance/care but to also awaken Republican leaders out of their stupor and warn them of the looming threat of incremental socialism, which, like its sibling ideology of fascism, depends on armies of armed agents for its existence. I failed miserably.

One reason for the failure is that Republicans like coercion as much as Democrats do, albeit for different reasons. Neither party wants to restrict the use of government force to its rightful purpose of enforcing contracts, regulating such negative externalities as pollution, and protecting life, liberty, property, and other individual rights.

Paradoxically, the people who hate guns are the people most in favor of medical care/insurance enforced with guns, as well as other social-welfare programs enforced with guns. Tellingly, the word “coercion” has never been used by the American media and intelligentsia to describe ObamaCare--or for that matter, any other form of collectivism and redistribution. After all, as with the Soviet and Nazi socialists, they believe that coercion is moral and just if done for the “common good,” as defined by them and not by the unwilling victims of their coercion. Why mention the means if the ends are good?

Now under ObamaCare, Americans are facing thousands of pages of coercive rules, 159 new coercive agencies and commissions, and thousands of coercive new IRS agents. As I detailed in my 1992 book on bureaucracy, propagation is the primary skill-set of bureaucrats. Using that skill-set, thousands of ObamaCare apparatchiks will quickly reproduce into tens of thousands.

As a result, Americans won’t be able to purchase medical care by simply walking into a doctor’s office and writing a check to the doctor in exchange for the doctor’s medical expertise, without first obeying the diktats of thousands of bureaucrats, who will be busily propagating behind their cubicle walls into tens of thousands of bureaucrats. Nor will Americans be allowed to purchase catastrophic medical insurance to cover what insurance is supposed to cover: catastrophes. They will have more freedom to get their car serviced without coercion than to get their bodies serviced without coercion.

The uninformed and misinformed who rely on the mainstream media for their misinformation and disinformation might say that most Americans don’t have the freedom now to pay for medical services without obeying the diktats of insurance companies and employers. What they don’t realize is that the Rube Goldberg contraption of the current system was created by decades of government distortions, diktats, and coercion. Like mold growing in your shower, distortions, diktats, and coercion always beget more distortions, diktats, and coercion.

It’s only a matter of time before the nation’s economic foundation collapses from the weight of the bureaucratic superstructure, as it has throughout history, including in Greece recently. In fact, the foundations are cracking throughout Europe.

But, shhh, don’t mention in polite society that the cause of the economic crack-up is coercion. You’ll be mischaracterized and demonized as a nut case who wants to overthrow the government. Then someday, Janet Napolitano will be at your door, and she won’t be carrying a fruit basket.

In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.

More:

Another vivid example of how the legislation manipulates revenues is the provision to have corporations deposit $8 billion in higher estimated tax payments in 2014, thereby meeting fiscal targets for the first five years. But since the corporations’ actual taxes would be unchanged, the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

In addition to this accounting sleight of hand, the legislation would blithely rob Peter to pay Paul. For example, it would use $53 billion in anticipated higher Social Security taxes to offset health care spending. Social Security revenues are expected to rise as employers shift from paying for health insurance to paying higher wages. But if workers have higher wages, they will also qualify for increased Social Security benefits when they retire. So the extra money raised from payroll taxes is already spoken for. (Indeed, it is unlikely to be enough to keep Social Security solvent.) It cannot be used for lowering the deficit.

Alan Reynolds goes as far as calling parts of the bill outright fraud:

To be unduly optimistic (more so than the CBO), assume that the new entitlement schemes increased by only 7 percent a year. At that rate spending would double every ten years — to $432 billion a year in 2029, $864 billion a year in 2039, and more than $1.72 trillion in 2049.

Can anyone imagine that the new taxes and fines could possibly grow by 7 percent a year? On the contrary, most of the claimed revenues are either a timing fraud (treating $70 billion for long-term-care premiums as newly found treasure) or self-defeating. The hypothetical tax on Cadillac plans (suspiciously postponed until 2018), for example, is designed to discourage employers from offering such plans and employees from wanting them — that is, it’s designed to yield less and less over time.

Moreover, the accumulating penalties on reporting joint incomes above $250,000 — a 39.6 percent tax, a 3.8 percent income surtax, a 0.9 percent Medicare surtax, and rapid phasing-out of deductions and exemptions — would greatly discourage any activity that would push income above $250,000. Most obviously, no sensible family whose income is normally below that pain threshold would be so foolish as to sell enough assets to let capital gains push them over the line.

Saturday, March 20, 2010

Greg Mankiw gives a rundown of the economic effects of this reform, concluding

Indeed, to be very wonkish about it, these tax changes could have especially large [negative] GDP effects. Some people like to argue that taxes have small GDP effects because income and substitution effects offset each other. But if you give someone a subsidy and then phase it out, both the income and substitution effects work in the direction of reducing work effort.

If, however, the doc fix is actually part of the Obama plan, and that law would be subject to normal political forces plus the new political dynamics the law would create, then the CBO predicts the Obama plan would increase federal deficits by $59 billion over the next 10 years and maybe one-quarter percent of GDP in the subsequent decade.

BAIER: And you call this deficit neutral, but you also set aside the doctor fix, more than $200 billion. People look at this and say, how can it be deficit neutral?OBAMA: But the — as you well know, the doctors problem, as you mentioned, the "doctors fix," is one that has been there four years now. That wasn't of our making, and that has nothing to do with my health care bill. If I was not proposing a health care bill, right — let's assume that I had never proposed health care.BAIER: But you wanted to change Washington, Mr. President. And now you're doing it the same way.OBAMA: Bret, let me finish my — my answers here. Now, if suddenly, you've got, over the last decade, a problem that's been built up. And the suggestion is somehow that, because that's not fixed within this bill, that that's a reason to vote against the bill, that doesn't make any sense. That's a problem that I inherited. That was a problem that should have been solved a long time ago. It's a problem that needs to be solved, but it's not created by my bill. And I don't think you would dispute that.

This logical fallacy, that a lack of a “doctors’ fix” for Medicare in this bill is not a reason – and the only reason – to vote against this bill (ergo, you should vote for it), is about a direct admission that Obama clearly has no answer to the charge that the cost savings touted here are bogus. Then, he reverts back to the “blame other people (George Bush)" strategy, which is a very weak strategy, and very unprofessional of this president.

As we discussed before (here and here and here), there are no cost savings with the proposed reforms, and costs will in fact increase, and care will be reduced, along with access.

And in summary here, Mr. Obama has only a weak quasi-moral defense of his proposed reform:

BAIER: Mr. President, I'm getting wrapped up, and I don't want to interrupt you, but to finish up, do you think this is going to pass?OBAMA: I do. I'm confident it will pass. And the reason I'm confident that it's going to pass is because it's the right thing to do.

Not only is this proposed reform not the right thing to do, Obama is not the right person to decide whether it’s right or not. He is wholly, and completely unqualified to make such a determination, due to his lack of private sector experience, and the blatant violation of personal liberty which this bill constitutes.

Bret, let me finish. If they don't, if they vote against, then they're going to be voting against health care reform and they're going to be voting in favor of the status quo.....

Excuse me? The vast majority of Americans understand that the status quo, as messed up as it is, is still much better than these "reforms". How dumb does the president think the American public is to consistently lie to them or to dictate what's best for people who are total strangers to him. Poll after poll shows the American people don't want this. Who does he think he is to effectively declare that he knows best?

The majority of Americans understand that this bill isn't about health care at all. It's purely an expansion of the Federal government into the deepest crevices of people's most private decisions, a huge tax increase, and a reduction of actual medical care in the United States. Previously, only fascist dictators carelessly shredded the constitution in pursuit of their preferred ends.

"...What the American people care about is the fact that their premiums are going up 25, 40, 60 percent, and I'm going to do something about it.

Yes we do care about that. However, two large reasons health insurance premiums increase so much is cost shifting from government-run Medicare and Medicaid (both of which denies more treatment than any private insurer) and to fund arbitrary government-imposed mandates. The bill Obama is pushing doesn't solve these problems. It greatly exacerbates them.

The only way to impose all the mandates the bill requires without increasing premiums is to extend meaningless coverage but deny actual treatment. How is that better?

BAIER:

Let me insert this. We asked our viewers to e-mail in suggested questions. More than 18,000 people took time to e-mail us questions. These are regular people from all over the country. Lee Johnson, from Spring Valley, California: "If the bill is so good for all of us, why all the intimidation, arm twisting, seedy deals, and parliamentary trickery necessary to pass a bill, when you have an overwhelming majority in both houses and the presidency?"

Good question. Obama never answered it.

I generally have a love/hate relationship with Fox, but this was a truly probing interview. Certainly a refreshing change from the usual fawning of other media outlets.

Personally, I'm disturbed how many people view this bill in light of one politician's personal political legacy and expect to extract great personal sacrifice for the glory of one man's ego? When did our roles switch and we became the servants of our public servants?Let them know what you think.

"Is it really true that political self interest is somehow nobler than economic self interest?"

This is what we must consider as the House is set to vote on the Senate's bill to hand over nearly 20% of our economy to the government. This segment of the economy happens to be a segment that affects each of us deeply - medical care. Obama claims that economic self interest is evil. Is political self interest better? Let your own and other representatives in the House know what you think. We provide a link on the top right hand side of the blog to a site where you can easily locate your rep.